State bills would raise minimum wage above and beyond Obama’s plan

State legislation would raise Massachusetts’ minimum wage well above and beyond President Barack Obama’s recent proposal to hike the federal rate, a move proponents say will let workers keep pace with the rising cost of living, but which critics say will hurt entry-level job seekers and undermine the economy.

By David Riley

The Herald News, Fall River, MA

By David Riley

Posted Mar. 7, 2013 at 12:01 AM
Updated Mar 7, 2013 at 7:01 AM

By David Riley

Posted Mar. 7, 2013 at 12:01 AM
Updated Mar 7, 2013 at 7:01 AM

» Social News

State legislation would raise Massachusetts’ minimum wage well above and beyond President Barack Obama’s recent proposal to hike the federal rate, a move proponents say will let workers keep pace with the rising cost of living, but which critics say will hurt entry-level job seekers and undermine the economy.

In his State of the Union address last month, Obama called for raising the federal minimum wage from $7.25 per hour to $9 and to tie future increases to the cost of living.

Massachusetts already beats the current federal minimum wage — the smallest amount employers can pay workers per hour here has been $8 since 2008. That puts Massachusetts on par with California and lower than only six other states.

There are still many Massachusetts families living in poverty. In Bristol County, 8.8 percent of families live below the poverty level, including 9.2 percent of families in Taunton and 18.5 percent of families in Fall River, according to 2010 census data.

A federal hike would effectively raise the Bay State minimum to $9.10. State law says the Massachusetts minimum wage can never be less than 10 cents above the federal rate.

Provost’s proposal would set the state minimum hourly pay at $12 by July 1, 2015.

Cabral and Pacheco are sponsoring bills that would set the state minimum wage lower than Provost’s, at $11, by the same date.

All three bills would make a major change to existing state law by scheduling automatic, annual increases in the minimum wage based on increases in the Consumer Price Index.

Pacheco, who has been either chief sponsor or a cosponsor of previously successful legislation to raise the minimum wage, said it makes sense to schedule automatic adjustments to the rate to keep its purchasing power intact and avoid repeatedly revisiting the issue.

“That’s why we have to keep filing the bill over and over again,” he said recently.

Pacheco said he is starting to hear some “significant support” for his bill in the Senate, especially when people realize what a worker actually earns at minimum wage.

A full-time worker in Massachusetts would earn about $16,000 a year at the minimum wage. If the minimum wage back in 1968 had kept up with inflation, it would be about $10.58 per hour today, according to the Massachusetts Budget and Policy Center. That would mean an annual salary of about $21,000 for minimum wage workers.

People cannot keep up with housing costs, food and other economic challenges at the current rate, Pacheco said.

“That’s the rationale for filing the bill: To ensure that we do everything we can to have some economic justice here and to value work and make work pay at least enough to get by,” he said.

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Provost described similar motivation behind her bill.

“It gets very frustrating to me, as someone who does constituent services, to have constituents who are working full time and in poverty,” she said.

Cabral said his bill aims to restore the minimum wage to the value it had about 45 years ago.

“I remember at one of my first jobs, I used to get paid minimum wage. It was $1.65,” he said. “In those days I could buy about 16 cups of coffee.”

Increasing the minimum wage typically pumps money back into the local economy, Cabral said.

“That money gets spent locally, primarily — at the local variety store, the local supermarket, the local mechanic,” Cabral said.

Both he and Pacheco panned arguments that raising the minimum wage leads employers to either lay off workers or delay hiring in order to afford the higher rate.

“There’s plenty of data that shows when you have an increased minimum wage, fewer people get hired in that category of pay,” Stergios said.

The impact mainly would fall on young people trying to break into the workforce and develop skills in low-wage jobs, he said. Youth unemployment already is an estimated 14 percent, a figure that could get worse with a minimum wage increase, he said.

“I understand the good intentions of those proposing a wage hike, but nothing ever comes free, and this one will come at a real cost to the young who have few options but entry-level positions in this economy,” he said.

Stergios also warned a wage hike could hurt manufacturers with thin profit margins.

Yet Christian Weller, an economist and public policy professor at UMass-Boston, called Obama’s proposed increase “modest” and said it would help the most vulnerable workers who lack much bargaining power and are often stuck at the minimum wage for long periods.

Ultimately, a higher minimum wage benefits businesses that hire workers at that rate because they have to spend less time and money training new employees, Weller said. Existing workers have less incentive to leave with a higher wage, reducing turnover, he said.

“There’s no evidence there’s widespread layoffs; on the contrary, it leads to more hiring,” he said.

Not including the financial sector, Weller estimated a minimum wage increase would cost the economy about 2 percent of profits across all sectors. Total profits have risen about 120 percent since 2009, he said. Meanwhile, a wage increase would drive up consumer prices no more than an estimated .2 percent, he said.

“This is sort of infinitely, in my view, affordable and wouldn’t do anything to the stock market or employment,” Weller said.